In general, CEO succession is disruptive to an organization, and external succession
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caused by external succession. Although traditional analysis of the succession
process has emphasized the importance of a smooth transition to minimize disruption,
research on external succession has emphasized the benefits of bringing in an
outsider to shake things up. We investigate the impact on firm performance of three
factors that affect the extent of disruption in external succession: forced
turnover, which is generally viewed as highly disruptive; prior appointment of an
external successor as an outside heir, in order to reduce disruption; and prior
appointment as an outside heir with a public promise of becoming CEO. The results
suggest that disruption in the form of forced turnover is associated with higher
post-succession firm performance. The appointment of external successors as outside
heirs first does not appear to be associated with improved firm performance. In
addition, outside heir appointments with a public promise may be associated with
somewhat worsened performance.
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